Techflow Marine of Northumberland won a large contract in China and was asked to provide a performance bond. The need to set aside cash cover against this bond would have restricted its cash flow and held its business back. We guaranteed a proportion of the bond, which released the cash to fund the contract.
Techflow Marine started in 2005 to provide the oil and gas industry with specialised hose reels which are used to offload crude oil from drill ships to tankers, and from tankers to onshore storage vessels. In February 2013, it won a $5.8m contract to provide the Chinese National Offshore Oil Corporation (CNOOC) with a custom-made oil tanker offloading system. Techflow Marine knew it would have to provide cash cover for the large bond as soon as the client placed the order. In the past, the company has provided 100% cash cover, but the size of the CNOOC bond would have restricted the cash flow.
Graham Clark, Director at Techflow Marine, said:
Techflow Marine had a turnover of £4.6 million in 2012, so this Chinese contract was significant for us. It was not only significant in size, but it also represents our continued development within the Chinese market. We didn’t want to turn it down, which has happened with large contracts in the past.
Advice and support
Having already met us, Techflow Marine got in touch in February 2013 for help with funding the performance bond. We suggested the Bond Support Scheme, and with advice from the exporter’s bank the company put together a proposal. After reviewing this proposal in May, we agreed in June 2013 to guarantee a proportion of the bond so Techflow Marine only had to provide a reduced cash cover to secure the bond. Once the bond was secured, the company could ask CNOOC for the first of its stage payments.
Graham Clark said:
The help from UKEF meant that we were able to fund the contract, and use the freed-up funds to look for other international contracts. Because we have this extra money to secure the bonds, we can still take on additional work worth up to $12m.
The Bond Support Scheme is helping us to grow. Without its help, this contract would have been too big for us. I advise exporters to engage UKEF as soon as possible. They have a real sense of purpose.
More information on the Bond Support Scheme
Under the Bond Support Scheme we provide a partial guarantee to a bank where it issues a bond in respect of a UK export contract. This protects the bank against the risk of the exporter being unable to repay them if a call is made on the bond by the beneficiary. The bank can then issue the bond even if it doesn’t have sufficient risk appetite. With advance payment and progress payment bonds, this may result in more working capital being available for the exporter.
Criteria for eligibility are:
Buyer based overseas
Export goods and services need a minimum of 20% UK content
We can typically guarantee up to 80% of the value of the bond.